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Uniform Association 
Cost Methods 

for the 

National Bureau of Metal and 
Spring Bed Manufacturers 




Compiled by 

CHICAGO OFFICE 

of 

MILLER, FRANKLIN AND STEVENSON 

BUSINESS ECONOMISTS 



New York, U. S. A. 1911 



Uniform Association Cost Methods 



FOR THE 



National Bureau of Metal and Spring 
Bed Manufacturers 



COST COMMITTEE 



H. N. DAVIS, Chairman 

F. A. POWERS, Vice-Chairman 

E. J. BARCALO, Ex Officio 
FRANK E. HALL 

C. G. BARLEY 

F. W. ADAMS 
JOHN TROUNSTINE 



COMPILED BY 

CHICAGO OFFICE 

OF 



MILLER, FRANKLIN AND STEVENSON 

u 

BUSINESS ECONOMISTS 

NEW YORK. U. S. A. 1911 



Copyright, 1911 
by 
National Bureau of Metal and Spring Bed Manufacturers 



^ 



A, J ^ 






©CU2926ftO 



Uniform Association Cost Methods 



FOR THE 



National Bureau of Metal and Spring 
Bed Manufacturers 



I. PREFACE 

II. UNIFORM COST OUTLINE 

III. MATERIAL 

IV. LABOR 

V. EXPENSE 

VI. FOUNDRY COST 

VII. PAINT COST 

VIII. FINAL COST 

IX. ACCOUNTING 

X. ESTIMATE COST METHODS 

XI. ECONOMIC DATA 

XII. CENTRAL BUREAU COMPARISONS 

XIII. CONCLUSION 



Index of Forms 



NAME 



1 COST OUTLINE CHART 

2 PRICE AND QUOTATION CARD 

3 STOCK CARD 

4 MATERIAL RECORD 

5 TIME TICKET 

6 PAYROLL 

7 PAYROLL ANALYSIS 

8 FIXED CHARGE DISTRIBUTION 

8A POWER EXPENSE ANALYSIS 

8B OFFICE EXPENSE ANALYSIS 

8C GENERAL FACTORY EXPENSE ANALYSIS 

8D PAINT DEPARTMENT EXPENSE ANALYSIS 

8E ALL WIRE EXPENSE ANALYSIS 

8F SELLING EXPENSE ANALYSIS 

9 FOUNDRY REPORT 

10 FOUNDRY COST SHEET 

11 PAINT COST SHEET 

12 OPERATION COST RECORD 

13A - B. .MATERIAL COST SHEETS 

14A - B. .LABOR AND FINAL COST SHEETS 

15 VOUCHER RECORD 

16 BALANCED STATEMENT 



Preface 

Upon presentation of this report on uniform cost methods 
with reference to the manufacture of metal and spring beds, 
it is advisable in recommending adoption and use to preface 
the body of the report with a brief statement of the character 
of the subject matter, how obtained and how best studied. 

Throughout the report each section is presented as a part 
of a treatise, deciding an issue or issues after careful research 
and thought, and presenting final recommendations as tersely 
as is consistent with clarity. 

Little or no expression is given on the value of the scheme 
or schemes, except perhaps to emphasize the importance of 
one or another section over others. The fact that the bureau 
has gone so far with this idea and the individual members 
have put themselves to expense and trouble seems to make 
the whole matter important in this organization. 

To make clear any obscure points and to bring out the 
value of the methods herein presented with respect to effi- 
ciency of management there will be presented on the second 
day of the meeting a statement by the firm compiling this 
report, this statement to become a part of the record of the 
meeting. 

Recommendations throughout are based on a careful study 
of the full scope of the business in the organization. The 
selection of the plants for basic study were by your Board 
of Directors and Cost Committee to secure representation as 
to line of goods made, size and location of factory and devel- 
opment of cost work. 



NATIONAL BUREAU OF METAL 



Of the total membership, 64 came under the work on this 
report. Of these 21 were surveyed and 1 1 called upon, making 
a total of 32 firms whose methods of business have affected 
in some way the final decisions. Uniform procedures were 
followed in the basic surveys and cursory visits, but as infor- 
mation asked was not available or not secured in all plants, a 
greater or less number of answers are given to different sec- 
tions. 

The basic surveys were divided as follows: Three Iron 
and Spring; Three Iron only; Seven mixed; Two Mattress 
chiefly; Two Brass only; Four Spring only; making a total of 
2 1 . The remaining eleven visited were divided in about the 
same proportion. 

Definite information on 25 was secured as to method of 
figuring costs divided as follows: 17 estimating costs; 16 
twice each year, and one once each month. Of the total, four 
are figuring on the basis of the reasoning given in this report, 
13 not. Eight firms are figuring from running costs. Of 
these, 5 have complete stock rooms, 10 partial stock and 10 
no stock; about equally divided between the use or non-use of 
material requisitions. Only those firms regularly figuring 
costs have effective, supervised time recording. Only three 
of those visited keep a detailed, accurate record of expense 
distribution similar to the methods shown. 

The widest variation of practice is shown in the distribu- 
tion of expense, both manufacturing and selling. Since the 
two sections of expense should be distributed differently, an 
analysis is given of the practice in each. In a total of 25 
factories, only five distribute on productive labor, and one on 
productive hours, methods recommended herein. Three com- 



AND SPRING BED MANUFACTURERS 



bine manufacturing and selling expense; two distributing on 
productive labor, one on productive hours. Two firms dis- 
tribute both manufacturing and selling on a total labor figure. 
That includes much non-productive. Eight put manufac- 
turing expense on labor and material. Three combine making 
and selling expense on labor and material, and one figures an 
arbitrary percentage for manufacturing expense without any 
check of actual performance. One figures on material only, 
another on sales price only. This analysis shows 10 methods. 
Information from 27 companies shows the following 
methods on selling expense distribution; eight to sales price; 
four to factory cost; three to productive labor; two to produc- 
tive hours; one to total labor; seven to material and labor; 
one of which is on an arbitrary percentage; one on material 
only; and one on the number of beds sold, showing 10 different 
methods. Of these firms only 10 are separating selling from 
making expense. 

From this study, methods have been recommended not 
on the majority either in number or volume of business, but 
on the best reasoning and methods found. Almost all stages 
of cost development were found in the survey, so that every 
method recommended is working practically in some factory. 

The report first discusses the basic principles of the uni- 
form cost methods, with a brief statement of the reasoning 
back of the recommendations with an explanation of the 
construction of the cost. Suggestions for simple schemes for 
handling material, labor, expense, subsidiary and final costs 
then follow with accounting and estimate cost methods in line 
with the uniform procedure. Comparisons of economic data 
secured is given, followed by a suggestion of the possibility of 
comparing data through the Central Bureau. 



NATIONAL BUREAU OF METAL 



In studying this report, and careful study is suggested, it 
should be regarded as a cost treatise to apply to the entire 
industry in the confines of this Bureau with the definite ob- 
jects uniformity, flexibility, and an installation with a maxi- 
mum economy of operation in any plant in the industry. 
This study will show that recommendation is made that 
efficient records be kept on material, labor and expense in as 
much detail as is desired by the particular firm. While this 
may mean a slight increase in effort in some plants, in no case 
will the addition of clerical labor preclude the advisability 
of installing the methods, even if only the economic need in 
the industry is considered and leaving aside the possibility of 
increase in efficiency in the individual plant. It must be 
realized throughout that no particular factory is in mind, and 
therefore the methods and forms suggested have been gener- 
alized and idealized. In application to the individual plant, 
study will need be given of local conditions to give the maxi- 
mum economy of operation with the most complete final re- 
sults. Figures given on the forms are all taken from various 
plants studied, and should not be used in any factory, since 
the components in many cases are from several sources. 
Figures on detail of paint and foundry costs are not given owing 
to lack of such information. 

The dissertation here following is a brief treatise deciding 
on general methods applicable to your industry based on a 
careful study of your conditions and needs as shown in repre- 
sentative factories in your organization. Only careful, broad- 
minded study will show the full value of the report and its 
method of applying to the individual plant. 



AND SPRING BED MANUFACTURERS 



Uniform Cost Outline 

In devising and recommending methods applicable to this 
industry, two necessities have been constantly present: 

First, need of showing the manager of each individual 
plant in a simple, effective way, an analysis of his business 
comparatively and statistically bringing out defective or 
strong points in his operations, so presented that repair or 
replacement can be made, and finally the trend or drift of his 
whole enterprise 

Second, Economic demand, that prices on like beds and 
springs be comparable in the market, this creating the second- 
ary demand that those prices be based on a uniform structure ; 
artificial means to be later applied to secure comparable prices, 
the underlying uniform scheme being used to give assurance 
to the several members comparing that the comparisons are 
fair. 

The first necessity makes few restrictions in the outlined 
scheme; in this case the reasoning being applied to individual 
cases. The second produces recommendations and methods 
that will, perhaps, run counter to individual practices and 
ideas. 

First was analyzed the reason for being in the manufac- 
turing business, particularly the bed industry. Whatever the 
ethical or moral reasons may be, the main end is net profit 
on your activities and return on your capital, the total of the 
two equalling gross profit. Since capital is given a return in 
market of its own and can be kept occupied with a minimum 
of effort, the return on it is expected whatever the enterprise 



10 NATIONAL BUREAU OF METAL 

you are engaged in. Therefore, as later shown, this item is a 
charge against the article cost, the only end is net profit for 
your risk of being in, and activity in the bed industry. 

The article price to your customer has no relation to the 
article cost except that your capital demands a definite return 
and the monies paid out for material, labor and miscellaneous 
expenses have to be met. By stern economic law these the 
price must include. Whatever above the total of these items 
depends on your own valuation of the risk of your business 
and of your ability. 

Chart form M F S 1 , shows on the right the total sales 
price or receipts, made of the component parts, material, 
labor, factory expense, sales expense and profit. The problem 
is really an analysis of the income and outgo. The first is 
easy of solution since there is no difficulty of tracing receipts 
to particular articles or lines, a matter of general ledger ac- 
counting. In solving the second problem, cost accounting 
was developed based on analysis of charges by means of general 
ledger accounts. This solution was not satisfactory since 
ledger work is accumulative and not comparative. This has 
developed the science of cost statistics which are combined 
with a part of the old cost accounting methods. The solution 
of this problem is given by an analysis of the sections. 

Material, productive or direct is easily cared for, since it 
is tangible and evident. It includes only that directly appli- 
cable to an article. In some cases material evident on the 
finished article cannot be correctly apportioned and will need 
go into expense. On account of the simplicity of this section, 
you are in general securing accurate figures. Later under that 
chapter two classes of errors are discussed, one the improper 



AND SPRING BED MANUFACTURERS 



M F S 



MANUFACTURERS 
Becessary to gdd for final succefl = of any "Business, lOfo or over 
_ _tp sjues p_riQ£ Eq«ai-T©t8-i-B3ru*Bdi*ures 

Salesmen's Salaries and Expenses, Advertising, Dis 
count, Rebate, all Delivery Charges; additional 
to factory Cost about 15 '/» 



a on -Productive Labor, Repairs, Replacements 
Insurance, Rent, Taxes, Supervision, 
Power, Heat, Share of Office Expense, 
Miscellaneous, Inward Cartage and 
Freight 



Add as 
Percent 
of Labor 
about 
40 $ 



Productive Labor only. Add 

cost for this and expense items 
_by_rjegartrneritB 

Productive Material 
that enters directly 
into the making of 
the product, plus 
waste, cartage ana 
Freight. 



12 NATIONAL BUREAU OF METAL 

pricing through lack of definite information; the other, not 
taking into account wastage. Charges for delivery and 
cartage go into material cost. 

To secure accurate material costs, accurate specifications 
are necessary, to be checked up with actual practice several 
times each year. Pricing for inventory should be at the pur- 
chase or market price, whichever is lower; for estimating, the 
purchase or market price whichever is higher. 

Material enters the sales price at cost. On it there is no 
profit since the customer is not buying rod, tubing, castings 
and enamel in the raw state but an article fashioned from 
these into integral whole. If at any stage of manufacture, 
a section or part has a value in open market, a profit is thereby 
accrued at that point, although it is not always advisable to 
there show it. Profit has no relation to the value of raw 
material. 

Labor, productive or direct, is that which is chargeable 
directly to the making of an article. To secure this presents 
a clerical problem combined with a careful distinction in 
applying in the borderland between direct and indirect. 
Many times it is necessary to throw labor into the indirect 
sections to avoid excessive clerical cost. The feature that 
emphasizes this problem is, that on day work the cost is sub- 
ject to wide fluctuation, and since it is on this section of cost 
that much profit is made, differences may make cost exceed 
price. It is, therefore, essential to keep records of labor, 
compiling the information for use in finding fluctuations, and 
in such a way that the distribution is accurately made. 

Expense contains all expenditures not classed under ma- 
terial or direct labor. This section presents a detailed problem 



AND SPRING BED MANUFACTURERS 1 3 

in dissecting, distributing and applying. All expense can be 
broadly classed under manufacturing, selling and general 
administrative. To do this it is necessary to regard the factory 
as making and delivering to one sales agent or jobber who 
bears all distributing expense. A certain portion of the general 
administrative would fall to manufacturing. Then analyze the 
expenses of the sales agent including his proper share of general 
administrative cost. Both classes can be further dissected, 
distributed, and applied in accord with the reason for existence. 

Factory expense includes rental on buildings and equipment 
or depreciation; repairs and upkeep; and interest on invest- 
ment; supervision whether general or departmental; power 
and supplies. All these exist to give a place for the workers 
to handle material to the best advantage, aided by equipment, 
supervision, power and supplies to produce the finished article. 
Every element exists to give place for or aid labor; every ele- 
ment varies in a definite though different ratio with labor. 

Factory expense, eliminating raw material storage, has no 
bearing on material cost. It bears no relation to sales price. 
It should, therefore, be distributed on direct labor and applied 
to article cost in accordance with direct labor put into that 
article. 

Since your industry covers a wide variety of articles in any 
one factory, demanding a variety of equipment and different 
investment, it is essential that the factory burden be depart- 
mentalized, this division being as fine as desired by the oper- 
ator. A percentage on productive labor will distribute fairly 
accurately with minimum clerical difficulty; expense cost per 
productive hour or per machine activity hour being refine- 
ments toward greater accuracy. 



14 NATIONAL BUREAU OF METAL 

Sales expense includes the cost of securing the article de- 
sired by the buyer at the price he has or is willing to give and 
placing the article in the buyer's hands and securing the money 
from him. It includes the cost of supervising or administra- 
tive, designing, exhibiting, advertising, salesmen's salaries and 
expenses, delivering and collecting. The gathering of this 
expense is a simple accounting problem. 

Sales expense distribution is a problem without a good 
solution. Much of this expense has a direct bearing on the 
profit made, the best illustration is the payment of low com- 
missions to salesmen on "leaders" or low profit lines, higher 
commissions on good profit lines. The best theoretical solu- 
tion is distribution to profit on articles as closely as charges 
can be made. This is impractical from a clerical standpoint. 
The next item affecting profits is factory cost. It is advisable 
to distribute sales expenses as a percentage to this cost. This 
method is possible only where accurate dependable costs are 
secured and costs of each month's shipments are figured. 
Since this last is a detail many of you do not desire, sales price 
known and easily compared in gross should be used. 

Further discussion of cost methods in the report is merely 
an elaboration of methods, of checking and properly presenting 
these elements under the reasoning that in the finished article 
material has no cost to add to itself except cartage, storage 
and wastage; direct labor is added with the expense of its own 
maintenance and place to work to the material value; sales 
expense is added to total making cost, and the difference be- 
tween this total and sales price equals net profit. Throughout, 
it must be understood that part of the profit is due to the 
making, part to the distributing, but none to the raw material. 



AND SPRING BED MANUFACTURERS 



15 



OS 2 



Article Casters 


Date 


Name 


Address 


list 


Dis. 


Net 


Tenns 


Remarks 


3/2 3 


Conway & Co 


Buffalo 


L2.00 


52£ 




lODa 






J.B.York Co 


New York 


L3.00 


62-^0 




^0 » 


















1 





































Back of Card to be printed as below: 



ORDERS 


Date 


Order 
No. 


Name 


Qty- 


Price 


Date 

Del'd 


Inv. 
No 


Remarks 


















































































z- 















16 



NATIONAL BUREAU OF METAL 




(6" X 8" Card) 



Back of Card to be printed as Delow 



3took Reoord 


Stock Record 


Stock Record 


Date 


Ord.lb 


Issd 


Red 


Balan. 


Date 


Ord.Ho 


lead 


Rod 


Balanoe 


Date 


Ord.IJoIsed 


P.cd 


Balan 





















































































































































































































AND SPRING BED MANUFACTURERS 



17 



IK F S 4 



MATERIAL RECORD / 


Department : 
ALL WIRE 


January 


February 


E \ 


Quantity 


Price 


Amount 


Quanti ty 


Price 


Amount 


c 


Piles 

Soap 

Waste 

TOTALS 


2 

4 
Lbs. 10 


8 




lb 
12 

! 30 












\ 






7 


10 















18 NATIONAL BUREAU OF METAL 



Material 

Productive Material is that which is chargeable directly 
to the manufactured article. Except for paint, material 
costs or estimates where figured, are now fairly accurate. 
Pricing of material is not universally well cared for, neither is 
issue and use to show wastage. 

For cost purposes it is advisable that a price and quotation 
record for each purchased article be kept, as per form M F S 2, 
whereon is entered each new price or quotation. The former 
gives the figures for cost records, making certain that the high 
as well as the low will be taken into account. Except on 
articles that fluctuate widely in cost average prices should 
be used; for these articles, prices by lots are advisable. 

Receiving of material should be recorded accurately. 
Storerooms afford the best check on use of material, and 
requisition for issue can be used. Where there are no store- 
rooms, monthly or quarterly department inventory reports 
will serve the purpose of securing average percentage of waste. 

Since the store-room scheme is almost universally possible 
or used, a store record card, form M F S 3, is suggested; this 
can be used for purchased stock, manufactured parts or finished 
product. Orders placed are entered, and issues and receipts 
give the balance on hand. 

To secure an inventory monthly or quarterly, the quanti- 
ties used can be posted from the requisitions or inventory 
reports. By pricing the usage for the period, the balance of 
the stock can be secured. Where requisitions are used for all 
stock, this record is easy to maintain by filing the requisition 



AND SPRING BED MANUFACTURERS 19 

slips until the end of the month or period by classes of ma- 
terial. As soon as material record form M F S 4, is posted, 
requisitions can be filed to order or bed number. 

Where department reports are used, an average waste will 
need be figured or estimated by comparing actual output with 
usage as shown from reports. Requisitions on all material 
will charge the losses direct to the order or type of bed. Paint 
and foundry material costs will be discussed under separate 
heads. 

A separate set of material record sheets, M F S 4, can be 
run to secure detail of supplies used, by departments. 



20 NATIONAL BUREAU OF METAL 



Labor 

The labor element of cost, usually considered the easiest 
to obtain, is not accurately distributed in many plants of your 
industry. 

It is quite customary to secure an average department cost 
by dividing the total pay roll of the department by the total 
production going through, not taking into account the opera- 
tions. This gives an average cost, not fully satisfactory. It 
is very essential that the time-keeping be watched closely and 
reports on labor be obtained in such a manner that an analysis 
of the situation may be easily obtained. For good cost pur- 
poses it is necessary: 

To gather labor time of each man by operations 

To make sure that this time is complete and 
accurately given, and 

That the total labor distributed to cost will 
check up with the total pay roll. 

Shown is a suggested form of time ticket, M F S 5, which 
may be used as an individual time card. This form makes it 
possible to arrive at the total operation cost per part, also by 
means of these time cards being made out in advance it is 
possible to lay out production by men or machines. 

With this plan the workman's time cards are made out in 
advance with man's number, job number and operation; time 
of starting is checked when work is started, finished time at 
close of operation, repeating the cycle for each new job, stating 
the time allowance for finishing the operation wherever possi- 
ble. All time cards are started anew at the beginning of each 



AND SPRING BED MANUFACTURERS 



21 



M F S 5 



Dept.Nc 


DAILY 

"R T^mjp 


WORK 
loyee 


Order Ho. 

TICKET 












Write Kinds of Work here: 
Bending 


Description of Material 






Work Started 


Weight or 
Pieces 


Piecework 
Price 


Time 


Weight 


Waste 


Date 


Hour 


iour 


Min. 


3/29 


7AM 


300 


.02 


2 






























































Work Conroleted 


Descrip. of Fin. Work- 
Bed Ends 


Total 


Tota: 


Total 


Total 


Day 


Hour 


3/29 


9AM 


Foreman 



22 NATIONAL BUREAU OF METAL 

payroll period, so that the time taken by each man for each 
week may be checked against his clock time. It is very 
necessary that the individual time cards of each man be 
checked. 

In plants or departments where there is piece work the tag 
system of keeping track of the amount of work turned out is 
useful, a tag with several coupons being made out for each 
piece and attached, a coupon torn off as the piece is passed 
from one operation to another. This general scheme is pretty 
thoroughly understood by the majority of manufacturers and 
needs no further discussion. 

After the time cards are used for payroll purposes they may 
be filed by operations or kinds of beds, and labor cost figured 
whenever desired. 

A cost payroll form similar to M F S 6, is the best method 
of tabulating and checking up labor with costs. It accom- 
plished the following results: 

Shows each department. 

Shows for regular payroll purposes the amount 

each man is to receive. 
From it can be drawn each week statement of 
of day work and piece work where a high per- 
centage of piece work is desired. 
Gives the amount of productive and non-pro- 
ductive labor, the names of the non-productive 
workers, this being an important item in low- 
ering operating expenses. 
Brings out weekly the labor cost totals for each 
class of goods under as fine a distinction as it is 
desired to make. 
Absolutely proves out the distribution of all labor 
against costs showing you that every item has 
been accounted for. 



AND SPRING BED MANUFACTURERS 



23 




24 NATIONAL BUREAU OF METAL 

This last point is particularly important as it determines 
the difference between an adequate or inadequate cost scheme. 
Many have neglected this one point in rinding costs. 

This form of payroll no doubt will take a little more time 
than most of the methods in use in your industry. However, 
it brings out an analysis of the situation that is worth many 
times over the small additional cost involved, giving as it does 
a positive record of comparison. 

A payroll analysis can be used in connection with the pay- 
roll, as shown in form M F S 7. This is a valuable record 
for every manager. It is the key of the labor conditions 
in the factory. Properly understood, it gives a true picture 
of the labor conditions each month. Besides the form shown, 
there should be a recapitulation of the total labor of all de- 
partments carried out under the same headings as shown. 



AND SPRING BED MANUFACTURERS 



25 



M P S 7 



PAY ROLL AHALYSIS < 


Department: Institution 


January January 


February February 


E ^ 
t 
c 


1911 


1913 


1911 


1912 


DUMBER OF EMPLOYEES: 
All Productive 
All lion-Productive 
Part Productive 
Total flumber 

AVERAGE DAILY PAY ROLL: 
Produotive 
Non-Pro duotive 
Total per Day 

PIECE WORK RECORD: 

Month Total Productive Pay 
Month Total Pieoe Work Pay 

f> Piece Work to Prod. Pay 

HOB- PRODUCTIVE RECORD: 
Month Total Pay Roll 
Month Total Non-Prod. Pay 

f» Don- Prod, to Total Pay 


$ 


4 
1 

3 




$ 






$ 




- 


<f 










8 

16 
2 


31 

77 






19 

440 

179 
40 

515 

74 

14 


08 

41 
86 

25 
84 





By Departments and for Total Factory. 



26 NATIONAL BUREAU OF METAL 



Wage Payment 

There are several different methods of wage payment in 
use other than day work. These are, principally, piece-work, 
premium, and contract work. Most of the factories are run 
part piece work and part day work, but in costs the mistakes 
are made in considering the piece work price the labor cost, 
not taking into account the fact that often these same opera- 
tions are performed day work. Because of this, labor costs 
are not accurate and do not prove out at the end of the year. 

The use of standing order numbers for non-productive 
labor in the factory to which all such labor can be charged 
gives an analysis of this item. These will later be carried into 
the expense analysis under the various headings. Such stand- 
ing orders gives a much better and clearer definition of non- 
productive labor with less confusion among the workmen, 
and finally a better knowledge of what non-productive labor 
consists. The extent to which this may be carried is directly 
in proportion to the size of the plant and the desires of the 
manager. Usually, it can be confined to not over fifteen or 
twenty items. 



AND SPRING BED MANUFACTURERS 27 



Expense 

A simple definition of expense is, that it is the account 
into which go all charges not covered in productive material 
and productive labor accounts. In addition to real charges 
it contains many quasi-fictitious charges to insure against 
heavy disbursements or loss, and to make for conservatism. 

Simple though the definition may be, the division and 
distribution of this accounting catch-all is far from simple. A 
technical discussion of this complex problem would be weari- 
some if it were not the very problem that makes many of you 
go wrong through faulty solution or an absolute disregard 
for this problem of cost. The seriousness of this problem is 
shown in that most of you show a burden of 100% or more 
on labor in various departments. It is, therefore, essential 
that this complex problem be subject to a close analysis to 
secure an accurate, but withal simple, solution. 

In the first scanning of the expense items in your business 
there are seen two big classes, manufacturing or making 
expense, and selling or distributing expense. Between these 
classes, there are several large items that belong to, and 
should be distributed to both. 

Both making and distributing expense accounts can be 
roughly divided into uncontrollable and controllable classes. 
The first are those items that, with your present equipment 
and invested capital, will continue unchanged without refer- 
ence to your volume within certain limits. The second, 
above a certain minimum, increase with your volume with a 
constantly decreasing percentage. 



28 NATIONAL BUREAU OF METAL 

The only true uncontrollable items can be blanketed under 
the terms, "Rent" and "Interest." If you rented your factory 
fully equipped you would need pay rent; if you borrowed all 
of your capital you would pay interest. Owning your own 
factory you should make it pay rent, likewise your capital, 
interest; although it is best to eliminate the profits in these 
transactions. You cannot begin to figure net profits until 
you have deducted these expenses from your receipts. 

Rent covers taxes, insurance and depreciation. The latter 
item is the only one subject to question. Despite the best of 
upkeep and repairs, buildings and equipment deteriorate and 
have to be replaced. Obsoletion, more swift than deteriora- 
tion, demands that you lay aside each year certain sums to be 
used for replacements that one year shall not bear the sins 
of many. This depreciation should be regarded a special 
surplus to keep your plants in the most up-to-date condition. 
The appearances and age of many of your plants, both build- 
ings and equipment show that you are leaving this out of con- 
sideration in your rush for business. 

Depreciation should be figured on purchase value, the 
percentages to use are recommended as follows: 

Brick or Concrete Structure 3% 

Frame Buildings 5% 

Machinery and Equipment lYi to 10% 

Chills Uy 2 % 

In some cases it is possible to put individual depreciation 
on special machines, but 10% is a good average 

We recommend not to depreciate the standing value as 
shown on the books, but rather build up a fund known as 
"Reserve for Depreciation," to which is credited the sale of 



AND SPRING BED MANUFACTURERS 



29 



: : 


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30 



NATIONAL BUREAU OF METAL 



M F S 8-A 



EXPEKSE ANALYSIS / 




January 


FebruaryE 


POWER 






t 












1911 


1912 


1911 


1912 c 


Coal 


% 295 


00 


$ 




$ 






Freight on Same 


17 


00 












Engineer 


90 


00 












Firemen 


55 


00 












Repair Labor 


17 


40 












" Material 


12 


13 












Supplies ■ 
















Oil 


5 


00 












Waste 


1 


25 












E t o 


















Fixed Charges 


















Insurance 


38 


44 












Taxes 


10 


40 












Depreciation 


11 


42 












Rent 

TOTAL EXPEKSE - MOUTH 


7 


93 














560 


97 












- PERIOD 


















DISTRIBUTION: 
















Office 1 io 


5 


6l 












General Factory 3 


16 


60 












Foundry 15 


84 


oc 












Spring Bed Dept. 40 


224 


00 












Couch 20 


112 


70 












Mattress 21 
TOTAL 100 io 


117 


bo 














560 


97 













Distribution made by Test of Amount 
Consumed by Various 
Departments 



AND SPRING BED MANUFACTURERS 31 

any old machine and from which is taken the difference toward 
the purchase of new. 

The monies tied up in plant, equipment and stock would 
draw from 3% to 5% if conservatively invested without the 
worry or trouble of making beds or springs. This charge 
should be made before net profits are figured. 

The department distribution is shown on Form M F S 8. 
Building value is arrived at by floor area, actual equipment 
value is taken. Depreciation is figures direct on values. 
Fixed charges go against the departments according to pro- 
portion of total value. 

The main basis for expense distribution is here shown. 
Selling to or buying from the others. Each section bears its 
own rent and interest. Later other charges will be made 
against the sections. It is as if each section were a separate 
establishment, selling or buying from the others. 

Non-productive or non-distributable labor is the first big 
controllable expense. Executive and general non-productive 
is borne by the whole business; department non-productive 
by the individual department. Supplies can be treated in the 
same manner, likewise miscellaneous charges. There only 
remains selling or distributing expenses which are chargeable 
direct to factory cost or on the sales. 

Power cost can be regarded separately since many of you 
buy this item. This department should be run as a separate 
institution selling at. cost its output to the various sections. 
Form M F S 8A shows the detail with labor, supplies, fixed 
charges and depreciation. The percentage of distribution 
can be secured by test or estimate once or twice a year, based 
on use. 



32 



NATIONAL BUREAU OF METAL 



Office Expense 

Form M F S 8B shows the general office items that cannot 
be charged to any particular department nor direct to selling. 
This general charge can be apportioned to selling and general 
factory respectively, depending upon the estimated use of 
this expense. 

Li F S 8-B 



EXPENSE ANALYSIS / 




January 


February E \ 




1911 


1912 


1911 


1912 c 


Executives 


$1 


435 


00 


$ 






$ 






$ 


Postage 




75 


00 
















Printing and Stationery 




b7 


50 
















Clerks and Stenographers 




■527 


00 
















Telephone and Telegraph 




7 


93 
















Donations 




10 


00 
















Advertising, General 




173 


90 
















Association Dues 




25 


00 
















Fixed Charges: 






















Insuranoe 




9 


lb 
















Taxes 




4 


17 
















Depreciation 




10 


08 
















Rent 




l 


94 
















Power 




5 


bl 
















E t o 

TOTAL EXPENSE - MONTH 






















2 


352 


29 
















TOTAL EXPENSE - PERIOD 
SHARE TO SELLING EXP. 2/3 






















1 


568 


20 
















SHARE TO MANUFAC.EXP. l/3 




784 


09 

















AND SPRING BED MANUFACTURERS 33 



General Factory Expense 

The general factory expense, Form M F S 8C takes its 
share of the office and the items of factory expense that cannot 
be distributed to any productive department. It includes 
the fixed charges that are apportioned on first sheet together 
with the alloted power. Double columns are given on all 
expense sheets so that the corresponding month last year can 
be shown. The total expense for the month is brought down 
and expressed as a percentage to the total productive labor 
of the factory for that month. This gives the general over- 
head percentage which is to be added to each department 
percentage. In so doing, each productive department shares 
in proportion to the amount of productive labor. 

At present there are many methods employed by your 
industry in putting expense into article costs. Manufacturing 
expense should be distributed through the productive labor. 
In general we recommend and here show the distribution as 
a percentage on productive pay. Expense cost per produc- 
tive hour is a more accurate method, but entails an increase 
in clerical work. 

Given herein is a table illustrating the difference between 
expense distribution on a productive labor and plus material 
basis, and the distribution against productive labor only. It 
can readily be seen that the expense distribution on the former 
basis does not show the proper relation, penalizing the high 
price bed, especially since the majority of members of the 
association have been adding all expense in one percentage. 
Note that material and labor distribution penalizes high price 



34 



NATIONAL BUREAU OF METAL 



F S 8-c 



E X P E H 


/ 

3E ANALYSIS \ 




January 


PebruaryE 


GENERAL EXPE1JSE 
















1911 


1912 


1911 


1912 c 


Share of Office Expense 


$ 


784 


09 


^~ 






$ 






I / 


Executives 




150 


00 
















Freight arid Express 




22 


00 
















Supplies 




17 


30 
















Repairs, in Detail 






















Buildings 




22 


50 
















Machinery- 




19 


20 
















Fixed Charges: 






















Insurance 




bo 


lb 
















Taxes 




29 


84 
















Depreciation 




14 


92 
















Rent 




11 


92 
















Power 




lb 


80 
















General Bon-Productive Labor 




179 


70 
















Storeroom 




^2 


10 
















Watchmen 




2^ 


00 
















Etc. 
TOTAL EXPENSE - MOHTH 






















1 


57^ 


v> 
















- PERIOD 






















TOTAL PROD. LABOR - MONTH 


7 


Ml 


fa-5 
















- PERIOD 


















fo EXPENSE TO PROD. LABOR-MONTH 


18.6 i> 
















-PERIOD 


| 



















AND SPRING BED MANUFACTURERS 



35 



bed. There is, unfortunately, no absolute way of loading 
on expense which will withstand all arguments, but experience 
seems to prove that expense apportioned on a productive labor 
basis in your industry will give the most equitable results. 



CHEAP BED 


Material 
Labor 


.92 .92 
.23 .23 




1.15 1.15 


Expense at 30% 
Material and Labor 


at 140% 
. 33 on labor . 32 


Total Cost 


1.48 1.47 


2 INCH BED 


Material 
Labor 


3.88 3.88 
.47 .47 




4.35 4.35 


Expense at 30% 
Material and Labor 


at 140% 
1 . 39 pro. Labor . 66 



5.64 5.01 

We advise handling the machine-shop as a separate shop 
similar to the power department, charging directly to any de- 
partment the work done for same, plus its proportion of mach- 
ine shop over-head expense. A distinction must be made be- 
tween the labor on repairs and that chargeable to new work. 
Costs should be kept of the new work such as machines and 
chills, to go into the equipment accounts. The repair labor 
would be absorbed by the various productive departments 
as an expense item. 



36 



NATIONAL BUREAU OF METAL 



A productive department expense is arrived at on form 
M F S 8D both for department and in total. First are the 
controllable items such as labor and supplies; these latter in 
detail. Then follow the repair charges and amounts charged 
to standing order numbers; then the fixed expense items. 

The total expense for the department is then obtained 
and expressed as a percentage to the productive labor in the 
department. To this is added the general percentage and 

M F S 8-D 



E X P E 


N 


5E ANALYSIS / 






January 


February 


E \ 


PAINTING DEPARTMENT 








t \ 




1911 


1912 


1911 


1912 


c\ 


Foreman 


$ 


65 


00 


$ 






$ 














Bon-Productive Labor 




8 


20 




















/ 


(Detail of Same) 


























/ 


Repairs ■ 


























J 


Machinery 




1 


55 




















/ 


Buildings 




2 


10 




















\ 


Tanks 




■5- 


70 




















\ 


Etc 


























/ 


SUPPLIES: 




11 


10 




















I 


Waste 






75 






















Etc 


























1 


FIXED EXPENSES: 


























f 


Insurance 




38 


90 




















1 


Taxes 




19 


40. 




















\ 


Depreciation 




48 


42 




















\ 


Rent 




7 


93 




















\ 


Power 

TOTAL EXPENSE - MONTE 




70 


00 




















) 




278 


85 




















/ 


- PERIOD 


























\ 


TOTAL PROD. LABOR - MONTH 




212 


24 




















\ 


- PERIOD 
























\ 


$ EXP. TO PROD. LAB. -MONTH 




131.6$ 






















-PERIOD 
























j 


f> GEH'L EXP. TO PROD. L. -MO. 




18.6J& 




















J 


-PER. 
























/ 


fo TOTAL EXP-.TO PROD.L.-MO. 




149-2J5 




















\ 


-PER. 

i 






















^ 


Sample for all 


Pre 


duct 


ive 


Dc 


parti 


nen 


te 















AND SPRING BED MANUFACTURERS 



37 



both shown by period to date. At the end of the year, the 
thirteenth month back would be dropped giving year to date 
percentage for cost purposes. 

Forms M F S 8D and 8E show the detail of paint depart- 
ment and "all wire" department expense. Similar sheets 
should be figured for each productive department, following 
the same methods and with much the same headings. 

All labor in the foundry except supervisional and repairing 
would be regarded productive for purposes of distributing 
the general expense. 



8-E 



E X •'? EN3E ANALYST'S ( 


AIL WIRE" DEPARTMENT 


January 


February 


E \ 
-t \ 

c ! 


1911 


1912 


1911- 


1912 


Foreman 

Hon- Prod. Labor (In Detail) 
Repairs (In Detail) 
Supplies (In Detail) 
Fixed Charges: 

Insurance 

TaxeB 

Depreciation 

Rent 
Power 

E 

t 

c 

TOTAL EXPENSE - MONTH 
- PERIOD 
PRODUCTIVE LABOR - MONTH 

- PERIOD 

$ EXPENSE TO PROD. LAB. -MO. 

-PEE 

<% GENL. EXP. TO PROD. L. -MO. 

-PEP 

fi TOT. EXP. TO PROD. LAB. -MO. 

-PER. 


I 


72 

69' 

;>9 

7 

-70 

55 

70 

11 

224 


00 

37 
22 
10 

82 
50 
84 
74 
00 


$ 






$ 






$ 






> 


■ 


590 
Ii09 

96. 

18. 
115. 


59 

70 

4# 




















) 



38 NATIONAL BUREAU OF METAL 



Selling Expense 

Selling expense should be brought out independently of 
factory expense. There are two good ways to apply it to 
article cost: One on factory cost, applicable when an indus- 
try has dependable costs; the other is on selling price, when 
the price is largely predetermined as in your industry. Selling 
expense analysis sheet, Form M F S 8F, takes into account 
all items that are chargeable to selling expense, including its 
proportion of the office expense. 

In case of a varied line it is an advantage to make a division 
of selling expense to the various lines. This can easily be 
done by separation of the accounts. 

To recapitulate: All expense must be included and the 
total of the distribution must be compared with the books 
where all expenditures are accounted for. It is not sufficient 
to bring out the expense in total, but it should be*apportioned 
to the various departments. 

Factory expense should be distributed f on productive 
labor. Selling expense should be distributed on factory cost 
as soon as secured. 



AND SPRING BED MANUFACTURERS 



39 



MPS 8-P 



EXPENSE ANALYSIS \ 




January 


FebruaryE 


SELLING EXPENSE 






1911 


1912 


J 1911 


1 

1912 


Share of Office Expense 


$1 


=568 


20 


$ 






Y~ 








Commies ions 




271 


10 
















Discounts and Rebates 




129 


75 
















Salesmen's Salaries 




422 


SO 
















Salesmen's Expense 




379 


70 
















Advertising 




122 


50 
















Legal - Collections 




7 


10 
















Shipping Department Expense 




43 


50 
















Labor 






















Delivery (Teams) 






















Entertainment 




19 


,'0 
















Losses 

TOTAL EXPENSE - MONTH 




12 


00 
















2 


975 


65 
















- PERIOD 






















OUTPUT COST - MONTH 


20 


000 


00 
















- PERIOD 






















% EXPENSE TO COST - MONTH 


; 


4.5 


$ 
















- PERIOD 























40 NATIONAL BUREAU OF METAL 



Foundry Costs 

Starting with the foundry in the iron bed work, a report 
similar to M F S 9, should be turned in each day showing 
total amount of scrap, pig iron, stone and expense material 
used, and amount of time of cupola tenders and workmen. 
This should show also the amount in pounds of good iron 
poured which may be obtained from the number of different 
kinds of beds poured times the pounds of iron on each, the 
quantity on each bed being checked up whenever the chills 
are changed. 

On foundry cost sheet, Form M F S 10, the daily reports 
are recapitulated. Many refinements are possible and have 
been evolved in various foundries. Detail of labor is given 
much closer, also a more scientific showing of material used. 

The method recommended is to charge all material, labor 
and expense in foundry plus share of general expense against 
the total pounds of good iron produced. 



AND SPRING BED MANUFACTURERS 



41 





F U B 


DRY REPORT 




Material 


L a b 


r 




Coke 


Pig 
Iron 


Scrap J 


Returns 


Stone 


Operation 


Time 


.Amount 


1 


100 


500 










Cupola 


10 


$ 3 


00 


2 














Tender 


10 


2 


00 


3 














Pouring 


60 


12 


00 


4 














Framing 


75 


13 


00 


5 














Chipping 


20 


3 


00 


6 






















7 






















8 






















E 






















t 






















c 
Total 














Total 










33 


00 




B e d 8 11 


a d e 










Lbs. 


Total 






lbs. 


Total 


Bo. 


Kind 


Per 
Bed 


Good 

Iron 


Ho. 


Kind 


Per 
Bed 


Good 
Iron 


! Recapitulate 


)n 


20 


706 


3 


60 










Total Labor 


$ 33 


00 


30 


701 


5 


150 










Expense 


43 


50 


50 

£ 


810 


6 


500 










Material 
Total 


70 


00 


146 


50 


t 






















c 

Total 
















Good Iron 






12,500 


12,500 


















Cost per Lb. 


.0172 



42 



NATIONAL BUREAU OF METAL 




AND SPRING BED MANUFACTURERS 43 



Paint Costs 

Absolute paint cost is very hard to obtain and the best 
that can be done is a close approximation. 

The method advised is to determine the relative quantity 
used on the various kinds of beds, as many are doing at the 
present time, but going further and checking up the quantity 
of enamel used. To determine the amount per bed, it would 
be well to start with a definite quantity in the tank, dip a 
certain number of beds, refill the tank to the original point; 
and if possible, make this operation continuous over a day 
and a half or two days, if there are sufficient beds of a kind 
to do so. This will not only give you the loss in drippage, 
but also for evaporation. After this factor for each bed is 
obtained, it should be checked up by taking the total number 
of beds dipped for a period or a month, times their individual 
factor to compare with the amount of paint material used. 
If any marked discrepancy should show up, instead of appor- 
tioning the discrepancy to all of the beds, it would be much 
safer to run additional tests. It will then be a comparatively 
easy matter to obtain efficiency reports on painting which will 
allow you to make definite comparisons between the different 
kinds of paint. 

In arriving at the material cost for paint, many of you have 
determined by special runs the amount of paint you consider 
necessary to charge against the particular bed. However, in 
doing so, there are several items of waste that we believe were 
not thoroughly determined, evaporation, and that entailed in 
cleaning up the tank. These would only show up at the end 



44 NATIONAL BUREAU OF METAL 

of a period, depending on how often the tanks were cleaned. 
Also, there is a loss of paint on the inside of the legs of the iron 
beds which some of you have not taken into account. It is 
known definitely from some of the methods used in obtaining 
paint cost that this item of waste has been neglected. 

The labor cost on painting could be expressed in direct 
ratio to the number of bed ends dipped. From observation 
it takes practically the same length of time regardless of the 
size. This knowledge would be the basis for the distribution 
of the expense of the department. The dry kiln expense 
could be distributed either on the number turned out similar 
to the labor, or on the relative amount of space the different 
kinds of beds occupy in the kilns, times the time kept in. It 
would seem better to bring out these various items of cost 
periodically and by items because of the wide difference in 
relative cost of labor material and kiln expense. Form M F S 
1 1 , will give you an idea of how this cost sheet would look. 

After the costs have been running for a period of time and 
should demonstrate little variation, it may be necessary to 
figure out the final cost at the end of each month. Even 
should the costs not be carried out monthly, it would be wise 
to check the costs as to amount of material put in, against the 
co-efficient determined for each kind of bed. Your enamel 
is an expensive raw material, and a very small percentage of 
waste amounts to a good many dollars for the year and, there- 
fore, should be watched carefully. 

Another thing to be taken into consideration is the quality 
of enamel used. Many of you will find upon trial that it is 
not always the cheapest in price that proves to be the cheapest 
material in the end. Records run as given will enable you to 
determine the question of quality to your satisfaction. 



AND SPRING BED MANUFACTURERS 



45 



Lacquering costs would best be obtained by charging both 
labor and material to the different classes of beds, the catalogue 
number showing the class, allowing you to arrive at the number 
of beds of each kind turned out in a month, together with 
the three items of labor, material and expense charged against 
each. 




46 NATIONAL BUREAU OF METAL 



Final Costs 

Final records of costs based on the elements as given before 
can depend on the desires of the manager and the needs of the 
situation both as to detail and frequency of figuring. This 
effect on the part of your association is to aid its members to 
secure actual costs as against estimated or guess costs. There- 
fore, in gathering the final elements it is essential that every 
detail be considered. 

Three general methods can be followed, by order or lot 
passing through, by operation classification and by article 
classification. 

Most of you are familiar with the first. Each lot going 
through has a definite order or lot number, this number show- 
ing on all time tickets and material requisitions. To secure 
all but foundry and paint costs which are shown separately 
after checking with controlling records, time tickets and 
requisitions are filed to order number. Upon completion of 
order, both are posted direct to final cost sheet. The only 
change in the sheets later to be made is the additional heading 
in each column of "Order No.," the totals by departments or 
operations being posted, grand total being divided by number 
finished. 

The second and, from an operating standpoint, more satis- 
factory method is handled by classifying operations in each 
department by difference in labor difficulty as well as difference 
in character. For instance, bending a certain size of tubing 
will be the same almost regardless of style of bed. By so 
classifying; the cost work will be much simplified, and a record 



AND SPRING BED MANUFACTURERS 



47 



such as Form M F S 12, will give the basic operation costs. 
Information on this record can be compiled monthly or for any 
period, by totaling and entering all time tickets for period 
covered, dividing total time and amount by output of period. 
Record of pieces per hour gives a very definite record of effici- 
ency; cost per 100 or per piece to be used on final cost sheet. 









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48 NATIONAL BUREAU OF METAL 

A refinement of this method can be made by regarding only 
the difference in labor difficulty of operations in any depart- 
ment, disregarding differences in character of operation. 
Under the operation classification scheme it is advisable to 
secure a department report of goods finished. 

Some of you are using the third method with good results. 
This scheme briefly is to file all requisitions and time tickets 
under the bed or article number, and figure up a cost at the 
end of any desired period from the articles made during the 
period. The only danger is in too great a simplification giving 
blanket department costs. 

The main differences are that the order cost scheme can be 
made absolutely accurate from an accounting standpoint; the 
operation classification somewhat simpler than the first gives 
the running detail of operations for factory executive use; the 
last method is simple from the clerical standpoint but sacri- 
fices some accuracy, and loses the detailed analysis. 

In figuring spring bed costs most of you are using piece 
work prices for labor costs despite a certain part of this work 
is constantly on day work. Securing a record and check on 
labor eliminates this loss. 

A spring cost is shown figured on Form M F S 13A and 14A. 
These forms are drawn for either order or classification meth- 
ods. If an operation record like form M F S 1 2 is used, the 
detail under labor cost will be much simpler. In this cost 
such items as japanning and trucking are figured in the de- 
partment over-head. The material sheet form M F S 13A 
can be once or twice each year, the labor monthly if desired. 

Form M F S 1 3B and 1 4B show iron bed cost figured in 
much the same manner. These forms are merely suggestions, 
in every case the forms should be designed to compare the 
detail from lot to lot, or from period to period. 



AND SPRING BED MANUFACTURERS 



49 



MPS 13-A 





FINAL MATERIAL COST SHEET 






Specifica 


t i n e 




Size: . 120-C 


Cat. No. 78 


A 


rticle: 
ate 


Springs 
2/23 


Sides L 
Fabric Coil 


Color Blue 


D 


Net Weight 


Cost No 


561 


Finish 


Ship. " 


Remarks : 




Packing Single 
























Lbs. 






Quantity 


Length 


Size 


Matdrial 


or 
Measure 


Price 


Amount 








WOOD : 
















Rails, End 
















Side 
















Corner Blocks 
















End Caps 
















Braces 
















IRON : 
















Angle Iron 
















Rod 
















Tubing 
















Castings 
















Bolts 
















Rivets 
















Wire Hooks 
















Slats 
















Ferrules 








01 








Fahri c 
















Material 














#12 


Coil Springs 


13 i 


1.91 




25 






Acme 


Helecal " 














# 7 


Frame Wire 


4 I 


1.76 




08 






Acme 

f M 
Acme 


Crimp Wire 


2 


2.11 




04 






Strands Wire 


2 i 


2.11 




05 






t H 


Border Wire 

PAINT MATERIAL 

Japan 

Enamel 
PACKING MATER IAL- 

Lumber 

Nails 
Waste , # 5 

TOTAL MATERIAL 








02 
02 




47 



50 



NATIONAL BUREAU OF METAL 



M F S 1J- 



I 


FIHA1 MATERIAL COST SHEET 








Speoificat io 


n s 


trtiele 


Iron Bed 


Size: 4. '6" 




Cat. Ho. 329 
Color White 




Date 


3/23 


Height Head 58" 
Height Foot 40" 
Pillars 




:Jumber 


529 


Pilling 




Remarks 




Vases 




Brass 




Net Weight 75 Lbs. 
Gross Wt. 81 " 








Packed 






















Lbs. 






Quantity 


Length 


Size 


Material 


or 

Measure 


Price 


Amount 








Angle Iron 


20 


I.50 




30 






3/a 


Iron Rod 


9 


2.00 




18 


2 


34 


1 Ll6 


Iron Tubing ) 


17 


1.25 




18 


2 


50 


" 


Iron Tubing ) : 


2.10 




21 


2 


61 


" 


Iron Tubing ) 
















Chill Castings 


27 


1.00 




27 








Malleable Castings 
















Sorewa 
















Bolts 
















Knobs 
















Brase Rod 
















Husks 
















Spindles 
















Ends 










4 




1 i/£ 


Caps 
Vases 
Springs 




.005 




02 


1 




Set 


Casters 

Paoking Material: 

Pads 

Twine 
Paint 

Enamel 


Set 
4 Oz. 


.06 




06 

06 

Q4 

15 








TOTAL MATERIAL 






1 


47 



AND SPRING BED MANUFACTURERS 



51 



M F S 14- A 



pi Hal labor cost shze: 



Art icle-. 
Date 

Cost Mo, 
Remarks : 



Springs 



2/25 



jbl_ 



Order Number, 
Period 



Q-ian ti ty 



Juant ity I Price Aid oun 1 1 ^ ° s t 
Each 



• e 8 t 

e a a , 



WOOD DEPARTMENT. 
Rip and Cut 
Boring 
Dressing 
Sanding 
Sawing 
Assembling 

Total 

Expense 
ALL WIRE DEPARTMENT 
Weaving 
Stretching 
Assembling 
Stra ightening 
Carting 
Bending 
Crimping 
Kao tt ing 

Total 

Expense 
IRON DEPARTMENT 
Punching 
Drilling 

Total 

Expense 
PACKING AHD SHIPPING 



TOTAL LABOR 

TOTAL EXPEB3E 
(/o on Labor gath- 
ered by Depts . ) 

TOTAL MATERIAL 

TOT&L FACTORY COST 

Selling Expense 

Total Cost 
Sales Price 

Profit 
-jo Profit or Loss 



09 

015 

02 



205 

29 



47 
16 



125 
15. 



02 3 



52 



NATIONAL BUREAU OF METAL 



PINAL LABOR COST SE3ETS 



Article: Iron Beds 








Date 3/23 




Cost Ho. 529 




Order Number Quantity 


Re \ 
a P p „ \ 

y e a t < 


Pp-ri or) 


H e B a 




Quantity 


Price 


Amount 


Cost 
Each 


" dl "g 


FOUNDRY ; 


















bulling 












$ 


01 




Straightening 


















Bending 














01 




Chipping 














03 




Assembling 














155 




Total 


















Expense 


















PAIHT DEPARTMENT: 


















Prime 














035 




Dipping 














Ob 




Finishing 














04 




Hand Work 


















Total 


















Expense 


















TOOD DEPARTMENT 


















Boring 


















Drilling 


















Punching 


















Total 


















iixponse 


















PACKING AND SHIP. DEPT 


















Packing 














12 




TOTAL LABOR 














a6 




Total Expense 














64 




Total Material 
TOTAL FACTORY COST 












1 


47 




2 


57 




Selling Expense 

TOTAL COST 














36 




2 


S3 




Sales Prioe 

PROFIT 
% Profit or Lose 












3 


25 






32 




10 $ 





AND SPRING BED MANUFACTURERS 53 

Accounting 

Modern accounting shows in a scientific manner the physi- 
cal and financial condition of the business — its resources and 
obligations; it enables the proprietors to compare intelligently 
and analyze the earnings and expenses; it points out the weak- 
nesses and unprofitable departments; it suggests proper reme- 
dies for improvements and equitably distributes the adminis- 
trative and burden charges, giving in a simple and concise 
manner a comprehensive statement of the entire business. 
Scientific accounting sets up and analyzes in natural sequence 
the transactions of a business, so that they shall converge in a 
logical and comprehensive statement periodically showing the 
actual results of operation. 

Annual profit and loss statements deal with facts, the 
majority of which are months old. They show conditions 
which would never have continued if the proprietor had only 
known of them when they first occurred. Too frequently they 
show in a final analysis only the worth at the beginning of the 
period and the worth at the close of the business, the difference 
being the gain or loss for the period. 

It is therefore recommended that if the cost scheme is 
carried out as herein outlined, a full statement of the business 
be secured monthly or quarterly. 

The material record sheet, Form M F S 4, gives the outgo 
or credits to material accounts and charges to manufacturing. 
The distribution of payroll to different classes of work gives 
the credits to payroll and charges to manufacturing. There 
remains only the disbursements for expense and material. 
Voucher record Form M F S 15, will give a simple method of 
caring for this feature of the accounting. Each invoice is here 



54 



NATIONAL BUREAU OF METAL 




AND SPRING BED MANUFACTURERS 55 

entered, the total being credited to Accounts Payable, the 
detail charged to the various material or expense accounts. 
All disbursements run through this record. 

With costs on finished product secured and the distribution 
of all disbursements accurately cared for in the general ac- 
counts, it is possible to draw off from the general ledger a 
statement such as Form M F S 16. 

Quick assets and quick liabilities you are all familiar with. 
Balances of material on hand are secured by starting with 
inventory, charging totals each period from voucher record 
and crediting with use of material record. "Work in Process" 
can be secured by charging with material, labor and expense 
used, and crediting with cost of goods shipped. "Permanent 
Investments" are shown at purchase value. Under general 
profit and loss "General Expense Undivided" represents un- 
used expense, the difference between actual and pro-rated 
expense. Interest and Discount are carried where nominal 
sums are borrowed, with charges of current interest and credits 
of discounts on purchases. 

Profits on lines of goods are figured by charging at cost 
the shipments for month and crediting with sales. 

Interest, Reserve and Depreciation are perhaps the only 
unfamiliar accounts. The former is credited with the interest 
on investment which is used each month in expense analysis. 
Depreciation is credited with the figure charged each month 
in the expense analysis. This may be divided into three 
accounts for buildings, machinery and equipment. This 
method leaves buildings and equipment at purchase value. 
Sales of machinery will be deducted from the asset account, 
the difference between purchased value and sales value being 
cared for from the proper depreciation account. 

This statement will be the final analysis of your business 
and a test of your costs and accounting. 



56 



NATIONAL BUREAU OF METAL 



MPS 16 



F I H A 


LSTATEMEBT ' 




January 


February 


E 


t 


Dr. 


Cr. 


Dr. 


Cr. 




QUICK ASSETS: 


$ 






$ 






1 






$ 






Cash 




750 


00 




















Bank 


9 


550 


00 




















Petty Cash 




50 


00 






















Botes Receivable 


1 


000 


00 






















Accounts Heceivable 


49 


500 


00 






















Personal Accounts 


1 


500 


00 






















MATERIAL OH HABD : 




























Iron Bed Department 


4 


456 


50 






















Spring Bed Department 


1 


937 


40 






















Mattress Department 


9 


600 


00 






















Couch Department 
E 
t 


1 


970 


00 






















c 
WORK IB PROGRESS: 




























Iron Bed 


7 


573 


40 






















Spring Bed 


5 


760 


40 






















Mattress 


9 


000 


00 






















Couches 




790 


00 






















PERMABEHT IBYESTMEBTS: 




























Real Estate 


75 


000 


00 






















Buildings 


29 


900 


00 






















Machinery ) 




























Equipment ) 


42 


000 


00 






















General Profit or loss 




























General Expense Undivided 


3 


143 


40 






















Interest and Discount 




360 


97 






















Income on Investments 








1 


370 


70 
















PROFIT BY HUES OF GOODS: 




























Iron Beds 








1 


030 


50 
















Spring Beds 










720 


75 
















Mattress 








6 


370 


12 
















Couches 










110 


00 
















QUICK LIABILITIES : 




























Accounts Payable 








15 


000 


00 
















Botes Payable 










500 


00 
















Advanoe Payments 










55 


00 
















Personal Accounts 










377 


00 
















Dividends 




























PERMABEHT LIABILITIES 




























Capital Stock 








200 


000 


00 
















Surplus 








14 


518 


00 ! 
















Interest Reserve 








1 


290 


00 
















Depreciation Reserve 
B A L A H C E 








9 


500 


00 


















250 


8A2 


07 


250 


842 


07 














J 





AND SPRING BED MANUFACTURERS 57 



Estimate Cost Methods 

There has been outlined the basic methods of a uniform 
cost scheme with running records. The elements that can 
be used by those who desire to get started on the right path 
are here presented following lines of the general scheme. The 
three elements are material, labor and expense. First is ad- 
vised definite specifications for each particular bed or spring 
manufactured that the cost be revised or verified at least 
twice a year. 

To arrive at material cost, you would do much the same as 
many of you are doing at the present time, take the actual 
material per bed, — but you should go farther, and by experi- 
ment determine the percentage of waste that occurs on the 
various materials. The percentage of waste is now in many 
cases added arbitrarily. It is just as unsatisfactory to use a 
too high percentage as a too low. 

Labor estimates could be made on each article revised as 
follows: Instead of figuring up labor cost once a month all 
labor can be distributed in a payroll similar to the one shown 
against each class of product made, at the same time keeping 
a record of the total quantity of articles turned out on a sep- 
arate production record. At the end of three or six months 
the average cost per article could be obtained and applied on 
a cost sheet and compared with estimates. 

Expense should be determined by means of an expense 
analysis, for this is one of the vital points where the majority 
differ. It will be possible for even the smallest factories to get 
out an expense analysis with probably not more than part of a 



58 NATIONAL BURE AU OF METAL 

day's time per month on the part of the bookkeeper. This 
general plan would require the keeping up of the expense 
analysis, the running of distribution payroll and production 
records for the month on each kind of bed or spring turned 
out by departments. The distribution of labor can be made 
to a number, or standing order number, which would cover 
the principal operations. It would be advisable in a cost 
of this kind to combine many operations. 

One of the dangers of an estimating plan, and the fault 
found in a number of factories is that when an estimate comes 
out several hundred dollars off at the end of a year, it is loaded 
into the cost for the coming year without due regard to its 
proper place. The statement made by a number that they 
come pretty close at the end of the year sounds good, but it is 
very doubtful if all of the costs figured on the basis represented 
show true conditions, in fact, the tabulations of costs that have 
been made bear out this statement. 

An estimated cost is a prophecy of future conditions based 
on past experience. It will always be necessary to estimate 
for future business and on new lines. For all those who take 
up the methods outlined in the report, it is suggested that the 
cost forms be used for both material and labor estimate. In 
figuring on a new bed a new cost sheet can be opened and the 
detail listed in the first column. This will afford comparison 
of running costs with estimates. 



AND SPRING BED MANUFACTURERS 59 



Economic Data 

To bring out the value of comparisons and the need of uni- 
form cost methods, economic data on various matters in the 
business has been compiled; in analyzing these figures it is to 
be remembered that the information was given to individuals 
outside the bed industry, bounden by contract not to violate 
confidences, and is, therefore, more likely to be of true worth. 
In this compilation of these figures no firm names were dis- 
closed to members of the bed industry. 

This data was compiled from figures either actually taken 
from the books or given from records. In general, the repre- 
sentative average is used rather than the mathematical, since 
knowledge of conditions in most cases made possible the 
elimination of expenses. 



Twenty-four answers on pricing of material for, 
Inventory 12 Purchase Price 8 Market Price 4 Least Price 
Estimate 1 3 Purchase Price 1 1 Market Price 



Seventeen answers on percentage inventory to annual sales, 
One 30; four 25; one 24; one 22; one 20; three 16; 
one 15; one 14; one 10; 

Representative average, 20% 



Sixteen answers on percentage material cost to sales, 

Iron Springs Mixed Brass Total 

High 65% 52% 65% 65% 65% 

Low 50 38 47 55 38 

Avge. 56 47 55.3 60 54.5 



60 



NATIONAL BUREAU OF METAL 



Twenty-four answers percent piece work or gain sharing 
methods to total payroll, 

High 90% Low 12% Average 47% 



Sixteen answers percent non productive payroll to total, 
High 45% Low 10% Average 27% 



Twenty answers, Dollars sales per employes. 






Iron Bed Iron Bed 


Springs 




and Spring only 


only 


High 


$2,930.00 $2410.00 


$2510.00 


Low 


1,860.00 2280.00 


1820.00 


Avge. 


2,547.00 2325.00 
Mattress 


1999.00 




Mixed Principally Brass 


Total 


High 


$3000.00 $3700.00 $3800. 


$3800. 


Low 


2200.00 3300.00 


1800. 


Avge. 


2588.00 3500.00 3800. 


Not 
Comparable 



Selling terms, 16 answers, from high to low; 

One 60-2%, 60 to 90; two-2%-30;one 60-5 %-10; three 60-2%- 

10; one 30-5%-20; one 30-5%-10; seven 30-2 %-10. 



Percentage of profit secured to Sales, 18 answers; 
One 27%; one 25%; one 20%; one 14%; two 12%; five 10%; 
two 7%; two 6%; one 4.5%; two admit a loss. 



Percentage of earnings secured to capital stock, 1 4 answers ; 
One 32%; three 25%; one 24%; one 22%; one 13.2%; 
one 1 1.5%; one 11%; one 7%; two 6%; one 3%; one no earn- 
ings. 



AND SPRING BED MANUFACTURERS 61 

Dollars sales to one dollar invested, 15 answers; 

Iron Springs Mixed Total 

High 6.90 6.80 4.85 6.90 

Low 2.10 1.85 1.38 1.38 

Average 3.87 4.65 3.01 3.72 



Percent of current liabilities to current assets, 16 answers; 

Iron Springs Mixed Total 

High 65% 67.5% 83% 83% 

Low 33 25 14.5 14.5 

Avge. 47 44 55 48 



Percentage of surplus to capital stock for 12 answers, runs 
from 100% to 10%; average about 25%. 



62 NATIONAL BUREAU OF METAL 



Central Bureau Comparisons 

As an association, the benefit to be derived from a universal 
installation of this scheme is through comparison of figures 
from various members, these figures being on the same thing. 
Since the method of securing the figures is the same, some 
value can be secured through comparison. If members do not 
care to disclose their identities, the Central Bureau affords an 
easy means for exchange. 

The reasons for comparison are, to 

First — Make market prices reflect costs 

Second — Make the business in the association more 
efficient and substantial 

To secure the first, comparison of costs, estimate sheets 
will be necessary together with comment on tabulation of 
costs by a central authority. That this comparison might be 
of true value, uniform specifications must be followed as far 
as possible and comparison made between competing of the 
same general style, size, weight and finish. 

This comparison leads to the second reason, but there is 
also possible comparisons of economic data on the whole 
business much more accurate than given in this report and 
therefore of greater value. 



AND SPRING BED MANUFACTURERS 63 



Conclusions 

In concluding it is strongly urged that the greatest number 
possible avail themselves of the methods outlined. The in- 
dustry is in an economic condition that needs change based on 
an analysis of these conditions. From the survey it is possible 
to say that there are few really efficient plants in the organiza- 
tion, the main reason for inefficiency being lack of the knowl- 
edge of conditions. The acceptance and use of these methods 
will bring individual gain through betterment of general and 
local conditions. 

A dozen special forms are shown and one standard ruled 
book which can be used for all of the analysis. Many of these 
will be simplified or eliminated in some factories. 

To get the full benefit of the complete scheme, a cost clerk 
should be appointed to be responsible; this clerk to be picked 
from the stock rooms or factory rather than the office. The 
clerical force for the number of hands employed will be ap- 
proximately as follows, depending on the details desired: 

40 - 90, one man 
90 - 200, one man and assistant 
200 - 350, one man and two assistants 

If the installation of the methods does not return considera- 
ble profit on the cost of upkeep, the application and use are 
not understood, and it is recommended that you confer with 
manufacturers who are making successful use of cost methods. 



JUL 20 1911 







One copy 



del. to Cat. Div. 



vuv 



20 



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>0* 


















aV "£v 




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/ *'^X < 'MM?~ %>/ 41& +< 



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